Donald Trump And U.S. Retaliation Against Italy Digital Tax When He Meets With Sergio Mattarella

U.S. President Donald Trump is expected to raise the possibility of U.S. retaliation against an Italian tax on digital companies when he meets with President Sergio Mattarella on Wednesday, a senior administration official said.

Italy approved a new tax on digital companies, including U.S. tech giants, as part of its 2020 draft budget on Wednesday, a move that could draw threats of retaliation from Washington.

The Italian scheme is expected to yield about 600 million euros ($662 million) a year, sources told Reuters on Monday, as Rome tries to find alternative revenues that will allow it to avoid a scheduled increase in sales tax.

Trump "believes this is an unfair discrimination on U.S. companies since they are the primary companies that would be affected by such a tax," the official said. "If such targeting of U.S. companies is done, he would have no choice but to retaliate to protect U.S. businesses."

European Union members have long complained about the way Facebook Inc (NASDAQ:FB), Alphabet (NASDAQ:GOOGL) Inc's Google and large Web companies collect huge profits in their countries but pay taxes of a few million euros per year at most.

U.S. officials had complained the levy unfairly targeted U.S. companies such as Facebook, Google and Amazon.com Inc (NASDAQ:AMZN) . They are currently able to book profit in low-tax countries such as Ireland and Luxembourg, no matter where the revenue originates.

France and the United States reached a deal in August to end a standoff over a French tax on big internet companies, with France repaying companies the difference between the French tax and a planned mechanism being drawn up by the OECD.

Italy's plan is broadly in line with proposals from the OECD, which last week urged governments to redraw rules for taxing global giants.